Question

Calculate following ratios on the basis of the given information:
(i) Current Ratio;
(ii) Acid Test Ratio;
(iii) Operating Ratio; and 
(iv) Gross Profit Ratio.

	₹			₹
Current Assets	70,000		Revenue from Operations (Sales)	1,20,000
Current Liabilities	35,000		Operating Expenses	40,000
Inventory	30,000		Cost of Goods Sold or Cost of Revenue from Operations	60,000

Answer 1

(i) 

Current Assets = 70,000

Current Liabilities = 35,000

Current Ratio = `"Current Assets"/"Current Liabilities "`

`= 70000/35000 = 2 : 1`

(ii)

Liquid Assets = Current Assets − Inventory

= 70,000 − 30,000 = 40,000

Acid Test Ratio = `"Liquid Assets"/"Current Liabilities" = 40000/35000 = 1.14 : 1`

(iii)

Net Sales = 1,20,000

Operating Cost = Cost of Goods Sold + Operating Expenses

= 60,000 + 40,000 = 1,00,000

Operating Ratio = `"Operating Cost"/"Net Sales" xx 100`

`= 100000/120000 xx 100 = 83.33%`

(iv)

Gross Profit = Net Sales − Cost of Goods Sold

= 1,20,000 − 60,000 = 60,000

Gross Profit Ratio = `"Gross Profit"/"Net Sales" xx 100`

`= 60000/120000 xx 100 = 50 %`